Invest in tax-saving mutual funds to enjoy dual benefits

DNMUM402033 | 12/1/2017 | Author : Shalini Sekhri | WC :401

Personal Finance
When it comes to financial matters, money saved is money earned! ??It is soon going to be that time of the year when the annual exercise of planning one’s tax saving investments will be in full swing.??Previously, most of us have opted for traditional avenues like Public Provident Fund (PPF), National Savings Certificates (NSC), designated Fixed Deposits and National Pension System (NPS) to avail the tax saving benefits under Section 80C of the Income Tax Act. All of these options require long-term commitment, with a lock-in period of anywhere from 5 to 15 years. Did you know Mutual Fund Equity Linked Saving Schemes (ELSS) also gives you tax rebate under Section 80C? These funds not only have the lowest lock-in period (thRead full story

ree years) but have historically also given higher returns than other options like PPF, NSC, etc.?Savvy investors have been opting for tax saving MF schemes as an avenue to avail tax benefit under 80C. Such funds typically generate returns by investing in a diversified portfolio of listed stocks and endeavors to offer the dual advantages of tax savings and growth potential. You can save up to Rs 46,350 per financial year and participate in long-term returns commensurate with stock markets. Also, in MF schemes, dividends received are tax free and capital gains generated over the original investment do not attract any tax, if held for over one year. However, it must be noted as the underlying investment is in equity, your investments are exposed to the associated volatility of stocks in the fund’s portfolio. Individuals who have a three-year investment horizon and want to participate in equity markets along with tax-saving benefits, can consider this route. Also, the investor should be willing to ride out the cycles of the equity market along the way, since there is an inbuilt lock-in period (three years). ?If one were to look back at the last decade, equity markets have outperformed traditional forms of investment by handsome margin. Coupled with falling returns on FDs, etc., there has been a massive surge in appetite for equity and equity MFs across retail investors and HNIs alike. Professional MF managers have found favour in investor community are attracting huge flows. ?Hence, tax-saving ELSS could be a great way to save tax and participate in equity markets, and thereby, in the economy! ??The writer is chief business officer, Indiabulls Asset Management Company Ltd

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